Shortages drive sharp hikes
In July and August, buyers of standard thermoplastics had no option but to pay significantly higher prices due to higher costs for petrochemical feedstock. This situation was made even worse by a tightening material availability caused by a series of unscheduled plant outages.
Demand was a little better than expected last month as those buyers low on stock scrambled for additional material. Industry stocks are, however, low and for the most part, producers were forced to ration orders.
All polymer classes registered three-digit price increases over the last two months. LDPE prices have increased by €120/tonne with LLDPE up slightly less at €100/tonne due to wider availability. The HDPE sector registered gains of €100-130/tonne with blown film grade prices rising at the top end of this range.
PP prices were pushed €140-160/tonne higher by feedstock shortages and PS prices climbed by a similar amount due to a sharp rise in styrene monomer costs. Plant outages contributed to a €150/tonne hike in PVC prices.
L/LDPE surges as supply tightens
L/LDPE prices escalated over the summer months due mainly to the surge in feedstock costs and supply tightness. In July, the ethylene contract price increased by €80/tonne to €785/tonne. Producers called for a €150/tonne price increase for L/LDPE in July to compensate for higher C2 costs and to improve their profit margins. They succeeded in passing through a €100/tonne price rise for LDPE and a €90/tonne increase for LLDPE, where there was a plentiful supply of imported material available.
The August ethylene contract price climbed by a further €10/tonne and producers asked for L/LDPE price hikes of up to €60/tonne. By mid-month, producers were making gains of €10/tonne for LLDPE and €20/tonne for LDPE.
Supply tightness and availability was a major issue, especially in July, due to several unscheduled cracker and polymer plant outages on top of the already reduced supply from production cutbacks. Demand was livelier than expected over the last two months.
Force majeure hits HDPE output
The force majeure calls by two major producers, LyondellBasell in central Europe and Borealis in Sweden, led to severe supply shortages for HDPE in July and August. As a result, suppliers had no difficulty in passing on the €80/tonne increase in C2 costs and making a contribution to profit margins. Blown film grades saw increases of €100-110/tonne in July. Blow moulding and injection moulding grades were €90-110/tonne higher.
The tight supply situation eased last month with Borealis restarting production at Stenungsund. There was, however, limited evidence of significant import volumes. Producers managed to push through price increases of €30/tonne for all grades compared with the €60/tonne they had initially targeted. With the August ethylene contract price up by €10/tonne, this still represented solid margin improvement.
Polypropylene producers have pushed through significant price increases over the last tow months following a surge in the cost of propylene and supply problems. Notations for all PP classes in mid-August are between €140-160/tonne higher than the end of June.
The supply issues included a force majeure at the Ineos PP plant at Geel, Belgium, which impacted supplies of random copolymer, the shut down of the Borealis PP plant at Burghausem, Germany, and an outage at Total's cracker at Carling, France, following an explosion.
Industry stocks are at very low levels due to the feedstock shortage and various producers either closed order books early in August or put customers on allocation.
PS margins under strain
PS prices have increased by around €150/tonne over the last two months following a surge in benzene and styrene monomer costs. The price increase was, however, insufficient to fully compensate for the feedstock cost rise and has not prevented profit margins from eroding even further.
Benzene has increased by a total of €219/tonne and styrene monomer by €162/tonne in July and August.
PS supply is well balanced with the low demand due to production cuts and idling of capacity. Demand remains very weak with many converters unwilling to buy with prices at these high levels. Only food packaging is stable. The continued low demand led BASF to announce the closure of a polystyrene plant at the Ludwigshafen site in July.
Outages drive PVC higher
PVC producers have lifted prices by around €150/tonne since end June as a result of large increases in feedstock costs and material shortages caused by unscheduled plant outages.
SolVin called force majeure for PVC and VCM at their Rheinberg, Germany plant at the end of June, which considerably shortened supply. This was followed in mid-July by force majeure for PVC at the Ineos Rafnes facility in Norway.
PVC production is unlikely to improve significantly in the next two months, despite the lifting of force majeure by SolVin for PVC from Rheinberg. Maintenance work is now imminent at Ineos in Schkopau but the Ineos VCM plant at Rafnes was expected back around mid-August.
Demand was weak during the last two months with pipe and cable sector orders stagnating. Window profile, on the other hand, has seen a pick-up in order activity in recent months.
This month, converters can expect to pay even higher prices for PVC given the cost pressure and limited availability.
PET firmer as demand improves
Western European PET prices were largely rolled over in July but rallied in August. The PET market is better balanced. Production cutbacks amounting to 800,000 tonnes and reduced Asian imports mean that supply is more in line with the lower order intake. Rising feedstock and PET resin costs in Asia mean that there was less Asian material being exported to Europe.
Feedstock cost movement has been mixed with lower paraxylene (down €67/tonne in July) offset by rising MEG. The August PX contract price was up €32/tonne to €732/tonne with MEG also higher by €35/tonne. PET suppliers report some success in pushing through price increases of up to €30/tonne.
PET resin demand, while still less than the same period a year earlier, was somewhat better than expected over the last two months. This was largely attributed to higher bottle demand due to the heat wave in southern Europe.
Meanwhile, the troubled Spanish PET producer La Seda de Barcelona has announced that it is to slash its PET capacity by half, disposing of non-core polymer and raw material plants, including the Artenius facility at Wilton, UK, and other plants in Italy, Portugal, Greece, Turkey and Spain as part of a radical restructuring plan.